Too clever by half…


We bought the Qs when they broke above the horizontal line.  A smart thing to do.  In May we saw the downdraft and said, aha, this is the beginning of the downwave and sold our position with a reasonable profit.  A dumb thing to do.  Or, clever.  Or, too clever by half.  Every time we try to anticipate the market we get egg on our faces.  We’ll probably learn this lesson after another 40 years of experience.

The sell trade was a violation of our trend following methods as embodied in the Basing Points procedure (As in StairStops book.)  When you make a stupid trade you have to figure out how to get back in, and we really should be long the Qs.  The procedure followed in these case is to get back on the trend with a very small trade and increase that trade at inflexion points in the trend — wave lows and new highs.

So we’re going to bite the bullet, eat humble pie and the egg on our faces and get back long the Qs.  The timing is absolutely terrible as there should be a downwave any minute.  But tech is so strong now and will remain so over the long run that we have to eat the consequences of our clever trade.

So we’ll buy just a little here and when we judge the downwave to have played out we’ll double up.

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